Oakmark Fund’s Portfolio Manager Bill Nygren, explained why KKR and Fiserv deserve to be included in his value picks, in an interview with CNBC. With a finance and accounting degree, Nygren is an experienced fund manager who works for Oakmark since 1996.
“If you just look at the surface multiple of KKR, it looks like it’s selling at roughly a market multiple which is a little premium to the other asset managers,” said Nygren. He also added that other investors will probably say it looks appropriate for KKR because it has been getting such good inflows compared to traditional managers which are generally suffering outflows. “There’s about $16 per share and KKR sells it about $40 a share. So, $16 per share is invested in KKR’s old products. – So we look at that and say we’re only paying $24 for the business, returning about $2. So that drops the multiple to about 12x earnings… We think that’s pretty attractive.” KKR & Co. Inc. (NYSE: KKR) is an international investment firm and capital markets business that supplies financing solutions and various investment opportunities for different types of investors.
Meanwhile, Bill Nygren emphasized that the market multiple of Fiserv is somewhere about 20x earnings. “If you look out just a couple of years and give them full credit for the synergies that they expect in expense savings that they record from the First Data acquisition, that multiple falls from about 20x down to 16x. And then further, there’s a business inside of Fiserv that accounts for less than 5% of its revenues: Clover.” Nygren mentioned that financial firm Square Inc., trades in the public market for more than all of Fiserv’s market cap but Clover, which has a lot of similarities to the business of Square, actually processes more volume. Fiserv, Inc. (NASDAQ: FISV) is also a multinational financial service provider that caters to a variety of market participants such as banks, broker-dealers, finance companies, and even retailers.
Nygren concluded by talking about the important hidden assets that are both present in KKR and Fiserv that will be vital for the companies’ growth in the future term. “So we think there is an important hidden asset in there, in addition to a company that is cheap, if you account for the cost savings, that they’re likely to record in just the next couple of years.”